Exam 6: Consumer Choices

-Refer to the diagram above. Which of the following is a true statement?

The marginal utility of two goods changes ______________.

Alex has $18 per week in his entertainment budget. He splits his time between going to the movies and renting video games. Each movie costs $6 while each video game rental costs $3. The measured total utility of each of his activities is shown in the table below. What is Alex's utility maximizing point?

Mark's annual after tax income earnings are $50,000. His $40,000, 3-year CD is maturing in the near future and he is planning to spend the interest on a 6 week holiday after that. His investments can earn a total of 10% before he starts his trip. If Mark's "present consumption" is the time he spends working and his "future consumption" is his trip, his optimal choice from the table below is to:

Jay and Jen are married with two children. They are preparing a household budget for the coming year. Based on statistical information for American households, approximately what portion of this family's annual consumption will most likely be budgeted for food and vehicle expenses?

Louisa works for a hedge fund company. Her wage increased from $30 per hour to $40 per hour. She can work up to 50 hours each week. The table below shows her utility from different levels of leisure and income. Louisa decided to increase her hours of work from 10 to 20 hours per week after receiving her raise. As a result, her marginal utility gain from having more income will now be:

Celia works as an articling student with a large law firm. Her wage increased from $30 per hour to $40 per hour. She can work up to 50 hours each week. The table below shows her utility from different levels of leisure and income. If Celia continues to work 50 hours per week after her raise, the raise will increase her utility by:

What does the budget constraint framework suggest when price changes? Include a brief explanation of what the results of price changes will depend on.

Todd is a cattle rancher. In June and July he spent his clothing budget on jeans and cowboy hats. Each pair of jeans cost $50 and each hat cost $100. At Todd's optimal choice, his marginal utility from the last pair of jeans purchased is 200. This means that his marginal utility from the last cowboy hat purchased is:

The government wants to make medicare benefits available to more people, but to achieve this goal, it needs to make cuts in the existing medicare budget. The two areas where they are considering cuts are non-essential elective surgery and 6-12 month mental health care programs. Applying the concept of diminishing marginal utility, the budget cuts should be made for spending on:

Which of the following occurs simultaneously with an income effect?

What does the budget constraint framework suggest when income rises?

The ________________ arises when a price changes because consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price.

The key assumption that accompanies the use of numbers for measuring utility is that:

For lunch, Maria eats only salads or vegetarian burgers. Her weekly food budget is $36. Each salad costs $6 and each vegetarian burger costs $3. When deciding how much of each good to buy, Maria knows that 2 salads and 4 vegetarian burgers will give her a utility of 8. Maria's utility-maximizing point is:

Troy has a part-time job in a book store to help pay for his college. He can work up to 30 hours each week at his job, which pays $9 per hour. The table below shows his utility from different levels of leisure and income. Troy currently works 20 hours per week. If he decides to work 30 hours instead, his marginal utility gain from the additional income is ____.

Josh's weekly budget for lunch is $24. He eats only pizza and burgers. Each pizza costs $6 and each burger costs $3. Josh knows that 2 pizzas and 4 burgers will give him a utility of 8. What is Josh's utility-maximizing point?

Approximately what portion of annual consumption is typically spent by American households on shelter?

-Refer to the diagram above. What is the significance of the point marked L1 at the bottom upward-sloping portion of the individual labor supply 2) curve?

Briefly explain what the economic analysis of household consumption behavior is based on. Do economists judge household utility?